The Farm CPA
Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.
Rural Mainstreet Index Continues to Weaken
Jul 18, 2014
Creighton University prepares a Rural Mainstreet Index that measures the economic outlook for the agricultural/rural sector of the economy. An index reading of 50 indicates growth neutral. The index for June 2013 was at 60.5 and for June of this year, it has dropped to 53.6, almost growth neutral. The index is composed of a survey of bankers in a 10 state region comprising Iowa, Nebraska, Wyoming, Illinois, Colorado, North Dakota, South Dakota, Missouri, Kansas and Minnesota.
Nine sub-indexes are calculated to arrive at the main overall index. These sub-indexes include, loan volume, farmland prices, farm equipment sales, home sales, etc. Here are some of the major trends in these sub-indexes:
- Farm Equipment Sales had an index level of 53.6 a year ago. It has now dropped to 35 which shows substantial negative growth. However, this index actually rose from May's reading of 33.6
- Farmland Price index has dropped from 58.4 to 49.1 which is slightly below growth neutral.
- The Confidence index (expectations six months out) dropped from 60.0 to 55.5, however, this is up from 51.6 in May.
Other macro trends are:
- Farmland values have fallen for seven straight months, however, the rate of decline has receded.
- Almost half of the bankers reported that higher beef and pork prices were a plus for their local economy.
- The percent of farmland sold for cash has dropped from 28.4% to 23.7% (this makes sense since a lot of cash has been deployed into farmland purchases over the last few years at higher prices).
- The percent of farmland purchased by non-farmers continues to decline dramatically from 19.7% to 14.4%.
Although the rural economy remains healthy, it just may not be as healthy as it was a year or two years ago. We will keep you posted on the trends.